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Media Coverage and the Cross‐Section of Stock Returns: The Chinese Evidence

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  • Liping Zou
  • Kien Dinh Cao
  • Yishun Wang

Abstract

Using hand‐collected news headlines for a large sample of listed firms in China over a period of 2000–2015, we investigate the cross‐sectional relation between media coverage and stock returns. Our results document that no‐media coverage stocks earn 55 basis points a month higher than stocks that are featured in the media. This result is robust after controlling for common risk factors and is not driven by short‐run return reversals. Further analysis provides evidence to support the investor recognition hypothesis, suggesting that mass media may play an incremental role in providing a supplement to traditional channels of information dissemination. Therefore, results in this paper are of interests to both investors and regulators on drivers of stock returns.

Suggested Citation

  • Liping Zou & Kien Dinh Cao & Yishun Wang, 2019. "Media Coverage and the Cross‐Section of Stock Returns: The Chinese Evidence," International Review of Finance, International Review of Finance Ltd., vol. 19(4), pages 707-729, December.
    • Handle: RePEc:bla:irvfin:v:19:y:2019:i:4:p:707-729
    DOI: 10.1111/irfi.12191
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    Cited by:

    1. Yao-Tsung Wu & Chien-Hung Liu & Kuo-Hao Lin & Dun-Yao Ke, 2024. "Does media coverage matter for the performance of technical trading strategies? Evidence from Taiwan," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 23(1), pages 147-166, January.
    2. Li, Cong-Cong & Xu, Hai-Chuan & Zhou, Wei-Xing, 2020. "News coverage and portfolio returns: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 60(C).
    3. Du, Hanyu & Hao, Jing & He, Feng & Xi, Wenze, 2022. "Media sentiment and cross-sectional stock returns in the Chinese stock market," Research in International Business and Finance, Elsevier, vol. 60(C).

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